Industrial Research of MAN Group UAE

Executive Summary

The aim of this assessment report is to examine the issues facing MAN Group UAE, the exclusive suppliers of MAN trucks and equipments in the United Arab Emirates. The company is a division of Darwin Bin Ahmed & Sons Co, a conglomerate in the UAE that has diversified its investment portfolio in such sectors as the hospitality industry, information technology, construction and travel and tourism, amongst others. The global financial crisis has impacted on the sales revenues of MAN, since their main customers from the construction industry are no longer buying their trucks. Furthermore, several of their large customers have opened up their own service centres, another source of revenue for MAN. To explore the issues facing MAN, the research plan outline has been provided, in addition to a SWOT analysis of MAN. Moreover, the industry competitor analysis is explored, using Porters Five Forces. The research findings of survey interviews are provided to shed light on the issue facing MAN. ULTIMATLEY, the report provides recommendations that MAN can implement in order to overcome the issues facing them.

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Introduction

DBA (Darwin Bin Ahmed & Sons Co) is a principal conglomerate based in the United Arab Emirates with diversified businesses. Since the company was diversified formed in 1965, it has since diversified into such areas as the distribution of trucks, heavy equipment, real estate, air-conditioning, heating & automotive elements, travel & tourism, hospitality, information technology, and construction, amongst others. During the mid-nineties, DBA Group sought to re-engineer its mission and vision in a bid to enhance the role it played in the global economy. The company managed to achieve this by way of earmarking the international market, in addition to increasing its global operations to more destinations. As a result, DBA group has realized a growth rate of 50 percent year-on-year, both in terms of the international businesses as well as domestic trade. In addition, DBA enjoys a channel of network distribution with its partners overseas, in over 35 countries. Also, DBA has overseas offices in such cities as Kiev, Moscow, Bangalore, Almaty and Tashkent (Oak Company par. 2). The buses and trucks manufactured by MAN Group in Berlin, Germany mainly find sue in construction site operations, road use as well as multiple operations. Throughout the commercial vehicle sector, the statement, “made by MAN” is associated with top-flight technology globally. Further, MAN is also involved in the manufacture of special purpose vehicles. These finds use in public utility. MAN Group UAE witnessed a significant increase in its market share, sales and popularity since its inception in 1994. Today, the company is a market leader in the commercial vehicles sector in the UAE. The intention of this research paper is to emphasise on MAN Company, the heavy equipment department of DBA. DBA’s MAN division is a subsidiary of the German-based MAN, the leading manufacturers of trucks and buses. Within the UAE, DBA group is the exclusive dealer of MAN. Accordingly, they deal in such products and services as MAN trucks, MAN service centre and MAN part centres.

Issues

Following the global financial crisis that has affected many companies globally, MAN, the heavy equipment department of DBA, has experienced a slowdown in terms of tis sales. This is mainly due to a sharp decline in the construction projects for the past one year. In the UAE’s construction market, MAN, Soanai and Mercedes holds the largest markets shares for the sale of construction equipments. MAN has gained a sound reputation over the years for the quality of its brands. As a result, a lot of the construction companies in the UAE have since come to associate the brand with quality and dependency, in effect leading to increased sales for the company. However, in the last one year, the global economic crisis has greatly affected the market conditions in the UAE, and more so with respect to the construction industry.

Further, a majority of the construction and freight companies that have previously relied on trucks from MAN Company now have their own service center. As a result, they now only rely on MAN Company for the supply of spare parts. It is important to note here that MAN Company gains most of its profits from its service centers. Accordingly, this implies that the profits of the company are destined to sink even further, because their main customers have opted to open their own service centres.

SWOT analysis

SWOT Analysis entails a specification of a business venture’s objective as well as the identification of its external and internal factors (Porter 128). These factors maybe either unfavourable or favourable in helping the business or project in question attaint its set objectives. In a SWOT analysis, strengths refers to the attributes of a company or individual deemed as being useful in assisting such an individual or company to attain set objectives. Conversely, weaknesses are the harmful individual or company attributes that hinders the achievement of set objectives. Opportunities refers to the external conditions necessary for helping a company or individual attain set objectives, while threats refers to external conditions that poses a danger to set objectives. It is important that a company is bale to identify its SWOT, since the successive steps involved in the planning exercise of a company in question to help it attain its set objectives may hinge upon these. Nonetheless, there is a need for policy makers to establish if the set objectives are attainable, based on their SWOTs. In case the objectives are unattainable, it may be necessary to select a different objective. The table below depicts the SWOT analysis of MAN Company, a division of Darwin Bin Ahmed & Sons Co.

Strengths Weaknesses Opportunities Threats
  • MAN is a subsidiary of a larger company with over 30 years of experience in the region.
  • Maintenance for the vehicles takes a very long time due to the heavy-duty nature of the engines and parts which need servicing.
  • Constant growth in the UAE economy requires many construction companies to increase their capacities, which in result leads to an increase in the sales of vehicles.
  • Competitive brands like Mercedes and Scania along with MAN are facing threats from cheaper alternatives like the Indian Mammut and Tata trucks which are lower quality.
  • The vehicles sold by MAN are very well known for their durability and resilience throughout the freight and construction industry.
  • MAN vehicles did not receive any technological improvements in their products; because they want to keep their costs low and not change what is already a successful product.
  • The company’s growth and the economic growth in the Middle East stages the perfect means for expanding throughout the gulf countries.
  • Sub-contracted companies which are involved in construction work in Dubai bring their own equipment when working on projects. So they will not buy trucks from MAN or any other company. As a result, the economy will be affected by the companies that are entering the economic cycle externally.
  • Servicing of vehicles owned by the mother and sister companies creates a constant flow of work and income for MAN regardless of a decline in sales.
  • There is no special training for the truck drivers of the freight service in the company. All of the drivers come from uneducated backgrounds and work for low wages.
  • Improvements in the countries road infrastructure allows for an more efficient freight services and expansion of the service to broader ranges.
  • The operating cost of the company is directly linked to the health of the construction and real estate industry in the UAE.
  • Minimal advertising costs because the company is already established and the construction industry does not work like the consumer market.
  • Service warrantee is not good compared to competitors and they should increase the quality of their service in order to maintain competitive
  • Construction and real estate businesses are more advanced than they ever were. They continue to advance and they have more educated choices in contracts and how to deal with other companies than before; thus making it easier to do business with them.
  • Companies are performing their services in-house and order the vehicles parts externally.

Research Plan outlines and comments

This section of the research report entails the conduction of research, both primary and secondary, with a view to shedding light on the issues facing MAN Company, in the face of the global financial crisis. To start with, primary research was accomplished by interviewing various personnel at MAN Company to gain a first hand insight into the extent of the issues facing the company. Regarding the secondary sources of information, the researchers endeavoured to examine the financial statements of MAN. In addition, a price comparison of the equipments and trucks sold by MAN was also done, erective to the company’s competitors in the UAE. Further, the researchers examined data on the recent trends in the construction market and real-estate and how the global financial crisis has had an impact on these areas.

For the primary interviews, the executive director of MAN Company, the sales manager and service manager were all interviewed by the researchers. These were internal interviews. However, the researchers had to first call the individuals to arrange for an appointment three days in advance. Secondly, interview questionnaires were also prepared to suit the individual field of the respondents. The individual interviews lasted for duration of between 30 and 45 minutes. External interviews were also conducted. In this case, two external interviewees were involved. Mr. Mutasem, a representative of Al Jaber Group was the first external interviewee. The group is involved in the construction, logistics, trading, heavy lifting and industrial sectors. Mr. Al Hammadi of CCP Inc. was also interviewed. The individual interviews lasted for one hour.

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Industry competitor analysis: Porter’s Five Forces

It is critical to understand the competitors’ dynamics within a given industry. To start with, this enables us determine a business venture’s potential opportunities, especially for new entrants into a given industry (Karagiannopoulos, Georgopoulos and Nikolopoulos 69). Furthermore, understanding competitor’s dynamics acts as a bold step by a company to differentiate its operations, relative to competitors who provide the market with related products and services. Porter’s Five Forces is a business model regarded as valuable in as far as marketing and business-based planning is concerned (George 184). In light of this, there is a need to assess the Porter’s Five Forces (See Appendix, dia. 1), as they Affect MAN Company.

Buyer Power

MAN has a strong brand identity due to the strong roots in the parent company in Germany. In addition, the buyers are well informed about the products and services ion offer by the company. Buyers are very sensitive to price, and the new entrants with reduced prices fro their services and products are a treat to buyers from the company. MAN also enjoys a superior product differentiation to suit the needs of the market it serves (Darwish Bin Ahmed & Sons Group par. 4). Buyers have an incentive to buy the products and service offered by MAN Company, due to their superior quality and the attached guarantee

Supplier power

As an exclusive dealer of MAN trucks and equipments in the UAE, this act as a source of supplier power to the company, the MAN division of Darwin Bin Ahmed & Sons Co. In addition, the company is affiliated to the parent company of MAN trucks and equipment, a large supplier in the global market. Furthermore, the company enjoys a positive backing from its suppliers of labour and expertise services (Darwish Bin Ahmed & Sons Group par. 5), another source of power the MAN Company in the UAE enjoys. The exclusive deal that MAN Company in the UAE has with its parent company in Germany means that they cannot sell any other brand of trucks and equipments. As a result, the Germany-based firm enjoys strong supplier power to their subsidiary in the UAE.

Rivalry

In terms of competitive rivalry, such strong rivals in the market as Soanai and Mercedes face MAN Group UAE. Man Group UAE is in a position to compete with its rivals by offering quality and affordable trucks and equipments to its customers. As a differentiation strategy, the company needs to emphasize on customers’ brand loyalty, as a means of ensuring rival companies do not poach their customers. In this case, the company’s two main competitors, that is Mercedes and Soanai, have not fully met the form of differentiation that allows them to emphasize on the needs of their customers.

Substitute threats

Despite the prevailing global economic crisis and its impact on such sectors as the construction industry, nonetheless, the substitute threat for MAN trucks and equipments remains low. This is because the brand is strong and ahs sound quality. On the other hand, as a cushioning effect against potential substitute threat, there is a need for the company to embrace a low pricing strategy. This means that customers would find the switching cost to the substitute product quite high, thereby sticking with the MAN brand. In addition, the price-performance ratio of MAN trucks and equipments is good. Therefore, the inclination of buyers to seek for alternative products and services remains low.

Entry barriers

MAN Group UAE enjoys customer loyalty for their products and services. This is because of the strong affiliations of the company to the Munich-based MAN Group. In addition, the group is also a division of Darwin Bin Ahmed & Sons Co, which is fully established in the UAE. Further, MAN is a strong brand (Darwish Bin Ahmed & Sons Group par. 6), and this acts as a barrier to new entrants. Besides, MAN Group in Munich enjoys economy of scale in the manufacture of trucks and equipments. Accordingly, this translates into a cost advantage that is also passed to its affiliate company in the UAE. There are no statutory monopolies in the UAE. In addition, permits and licenses requirements are affordable; meaning the entry of new players is easier. The exclusive supplier agreement between MAN Group UAE and its parent company in Germany has meant that no other supplier of MAN trucks and equipments can enter into the UAE market.

Research and Research findings

According to the sales manager at MAN Group UAE, the company does not rely on the use of a showroom in order to sell its trucks. The main reason for that is that the construction and industrial market is very different from the consumer market. To the construction workers, who are the main customers of the company, the most important thing is knowing about the specifications of a vehicle that they wish to purchase. Reliability of a truck is a vital specification for trucks in the construction industry and so far, the MAN trucks have proved quite reliable. Although MAN trucks are a lot more expensive compared with other trucks, nonetheless, their reliability guarantees the customers a value for their money. Other than the construction industry, the Abu Dhabi municipality is another notable customer of MAN trucks in the UAE. IN 2008, THE COMPANY managed to sell 1,100 trucks, surpassing its target of 1,000 trucks every year. However, the sales department project selling below the targeted trucks, due to the global financial crisis.

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An interview with the service manager of MAN revealed that the service department of the company deals with servicing of MAN heavy duty trucks on for their customers. The company’s service contract comes in two forms. MAN Group UAE can either supply the service under a contract that comes in a timed schedule rather than mileage. Alternatively, the servicing may take the form of an emergency, if the vehicle requires fixing, as opposed to maintenance. The company prefers servicing based on a timed schedule and not mileage because unlike normal vehicles, heavy-duty trucks can take a much heavier load as they work 12 hours a day non-stop moving and carrying materials to and from sites. Because this is the basis for their design, they do not require an elaborate maintenance format. MAN has five servicing facilities in the UAE, two in Abu Dhabi, one in Umm Al Nar and the other in Musaffah. The company also has a large servicing facility in Jebel Ali. Trainers from MAN Group in Munich train workers at these various servicing centres adequately. In addition, the company has installed an ISO certified process system, which incorporates Checklists and proper tools, and machinery, strategically placed in the facilities. These help in cutting cost and time, making the whole servicing process more efficient.

The quality of the trucks that MAN Group UAE sells has enabled the company to capture a large market share amongst customers in the construction industry. Although the current global financial crisis has almost crippled construction operations in certain parts of the UAE, nonetheless, there are still large customers who are purchasing MAN trucks and equipment because of their reliability. In addition, Saif Bin Darwish & Sons, the mother company of MAN Group UAE has invested heavily in the construction industry. Therefore, it has remained a leading customer of its subsidiary. The firm has also expanded to such other areas as Dubai as a way of supporting the large investment infrastructure established by the government in Dubai. As the large customers to MAN Group UAE become bigger, there is the tendency for them to establish their own service facility, to service their expanding fleets of trucks. This ahs in effect greatly affected the profitability of MAN. However, since the company is the sole supplier of MAN spare parts in the UAE, these customers still have to purchase their spare parts from MAN Group UAE. Although the profits from servicing of trucks have reduced, there has been an increased in the revenue accruing from the sale of spare parts. As a further cushioning effect against eroding profit margins, the company intends to raise the prices of all spare parts ordered and installed out of the firm.

Recommendations

The two mains issue that currently faces MAN Company in the UAE is a reduction in the sales of trucks and equipments, due to the global financial crisis. As a result, most of the customers to the company, many of whom are in the construction industry, are not in a position to purchase new trucks and equipments.

To counter this development, the company can implement the following strategies

  • Investing in regional areas that have not been hit hardest by the global economic crisis, and whereby the construction industry is still in operation.
  • Fuel is a contributing factor to the operating costs of a truck. Therefore, when the rate of consumption is high, the operating costs also increases. Therefore, the company could ensure that they improve the consumption efficiency of their trucks.
  • In a bid to boost the sale of trucks and equipments, MAN Company can introduce leasing services for their fleets of trucks. Accordingly, the company could enter into a leasing agreement with their customers for a specified period of time, during which the leasing company will cater for the fuel cost and benefits from the services of the MAN trucks. MAN Company would also get the exclusive right to service these trucks, in addition to providing spare parts, under the stipulations of the contract. This would then increase the sales of spare parts, in addition to the increased revenues from the service center.

The second issues facing MAN Company is that of their large customers opening up their own service centers to service their fleets of trucks. Consequently, MAN’s profit margins have plummeted because services centers are the leading source of revenue fro the company.

  • Since the company is the sole distributors of service parts for MAN trucks and equipments, the company can increase the prices of service parts bought by customers to install into their trucks at their individual service centers.
  • Alternatively, the company may offer to install service parts fro free to customers who buy spare parts from them. In addition, large customers could also have their trucks serviced at a discount.

Conclusion

Darwin Bin Ahmed & Sons Co, a principal groups of companies based in the UAE, has diversified its operations in such sectors as information technology, travel and tours, hospitality and the distribution of automotives, amongst others. MAN Company is a subsidiary of DBA & Sons Co. the company is the sole distributors of MAN trucks and equipments in the UAE. Due to the reliability of the vehicles they distribute, the company has increased its market share in the commercial vehicles sector. However, the global economic crisis has led to reduced sales for trucks. In addition, the main customers for MAN, principally from the construction industry have opted to open their won service centre to service their fleets of vehicles. If MAN is to maintain a competitive position in the market, when faced by such rivals as Mercedes, there is a need for the company to address the issues it faces quickly. The company needs to capitalise on the exclusive dealership it enjoys for the distributions of MAN trucks and equipment. Accordingly, the company may decide to increase prices of spare parts for customers who do not wish to have them installed at its service centres. In addition, MAN should implement a program to enable the free installation of service parts bought from the company. Further, the company may opt to offer service parts at a discount to its loyal customers. In addition, MAN should contemplate on starting a leasing program for their trucks to allow customers who are wiling to use their trucks in the construction industry, and yet cannot buy these.

Work cited

Darwish Bin Ahmed & Sons Group. (n. d.). The Darwish Bin Ahmed & Sons group of Companies. Web.

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Darwish Bin Ahmed & Sons Group (n. d.). MAN Trucks. Web.

George, M.J. Organizational Behavior. New Jersey: Prentice-Hall, 2002.

Karagiannopoulos, G. D, Georgopoulos, N. and Nikolopoulos, K. Fathoming Porter’s five forces model in the internet era. information Journal, 7.6(2005):66-76.

McGinley, Shane. ‘Slow recovery’ seen for UAE construction sector. Arabian business. 2009. Web.

Porter, Michael. Five Forces Model. Jurnal Informatika, 5.2(2004):127-134

Tordjman, Jeremy. Dubai financial crisis reverberates across the globe The Daily Star. November 2009. Web.

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